The Australian Performance of Construction Index (PCI) has returned to growth as issues with Omicron and supply chain disruptions eased slightly in February.
Presented by the Australian Industry Group (Ai Group) and the Housing Industry Association (HIA), the seasonally adjusted Australian PCI improved by 7.5 points to 53.9 in February – where results below 50 points indicate contraction of the industry.
Ai Group chief policy advisor Peter Burn said the holiday hangover had started to ease for the industry.
“Following the Omicron-affected contraction of the sector in the December-January period, construction activity improved in February with activity in three of the four component sectors expanding and apartment building activity flat,” he said.
Apartment construction was the slowest of the sectors – albeit double its December-January score – with an even score of 50, while engineering, commercial and housing constructional scored between 55 and 60.
Promisingly, new orders rose back above 50 to a score of 55.4, securing the short-term future of the construction industry.
HIA economist Tom Devitt said he expected the recovery from Omicron to continue in the coming months.
“There are no indications that home building activity is facing a weaker outlook any time soon,” he said.
“Home building bounced back as the Omicron wave abated. New home sales are exceptionally strong, up around levels usually only seen during periods of direct stimulus, on the back of the pandemic trend towards lower density housing.”
The issue with the increase in new orders is employment growth was one of the only metrics to dip in February, falling 2.2 points to 54.3.
Burn said this was likely to continue as Australia battles a skilled labour shortage.
“The difficulties in supply chains persisted although the pace of decline in supplier deliveries eased,” he said.
“Ongoing inflationary pressures were evident with cost rises for inputs and wages growth remaining elevated and selling prices also rising on the back of solid demand.
“With capacity utilisation at very high levels, employers from across the construction sector reported ongoing difficulties in filling positions particularly for skilled labour.
“These conditions, together with the rebound of new orders suggest further inflationary pressures in the period ahead.”
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